(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By John Foley

HONG KONG (Reuters Breakingviews) - Arresting a self-styled Gandhian hunger-striker on Aug. 16 was a foolish move by India. Manmohan Singh's government claims not to have directly requested Anna Hazare's brief detention, but the episode has cost it some credibility all the same. India's political sclerosis may now worsen. In the short term, that will hurt an economy facing inflation of above 9 percent and in dire need of decisive reform. Yet the ruckus could have a good long-term outcome, if the botched crackdown leads to tougher action on endemic corruption.

The white-clad 74-year-old has fasted over plans to create a new anti-corruption watchdog. He contends that the government's draft of the Lokpal bill, originally mooted four decades ago, lacks teeth. And he has a point. Graft in India is often claimed to cost the Indian economy 1 percent to 2 percent of GDP a year. The government has been rocked with scandals relating to its handling of 2010's Commonwealth Games, and the allocation of 2G telecoms licences. The legislation as proposed would make it hard for the watchdog to target top political figures, and the body would lack the autonomy Hazare and his supporters demand.

Arresting a peaceful protester, and 1,500 of his supporters, may be unpalatable. Yet the protests and overzealous crackdown are distractions from India's pressing problems. Above-target inflation is being intensified by infrastructure shortages and supply bottlenecks. A land acquisition bill that would help ease the problem is stuck in parliament, which has achieved nothing in weeks. The so-called "monsoon session", which ends in September, looks set to be a washout. Further paralysis is likely to defer needed reforms, which casts serious doubt on India's ability to sustain 8 percent to 9 percent GDP growth.

But this could be a turning point. Singh has so far failed to act decisively on corruption. The groundswell of support for Hazare's peaceful methods, twinned with anger over the response, makes it difficult for inaction to continue. Anything that pushes corruption further up the agenda should augur well for India's markets, foreign investment and economic growth. Nor does the lesson extend only to India. Other countries struggling with corruption should take note how peace and persistence can break more ground than sticks and stones.

CONTEXT NEWS

-- Protests erupted in cities across India over the detention of a self-styled Gandhian protester who undertook a hunger strike over stalled legislation on corruption, along with some 1,500 of his supporters.

-- Anna Hazare, a 74-year-old anti-graft campaigner, was arrested in Delhi on Aug. 16, and refused to leave prison after being freed within hours. As of Aug. 17 he was continuing his fast from inside the prison. His actions were condemned by prime minister Manmohan Singh as "totally misconceived".

-- Hazare's protests centred on the Lokpal Bill, a piece of unpassed legislation that would create a new anti-corruption ombudsman. The bill has been mooted in various forms since the late 1960s.

-- The latest draft from the Singh government was rejected by Hazare, who was involved with the drafting of an alternative, tougher version of the bill known as the Jan Lokpal. The government's proposed watchdog, for example, would be unable to investigate the prime minister, and would have no police powers.

-- India has been plagued by corruption scandals in the past year, including allegations of bribery in the organisation of last year's Commonwealth Games, and a controversy over allocation of 2G telecom licences, which a state auditor claimed cost the government up to $39 billion in lost revenue. The resulting probe saw some of India's top telecoms tycoons brought before a parliamentary committee.

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